Cyclic nucleotide-gated (CNG) channels mediate sensory transduction in the visual and olfactory systems. These channels activate with cyclic nucleotide binding, and their activity is modulated by both intracellular and membrane associated signaling molecules. Channels containing only the principal subunit of the olfactory CNG channel, CNGA2, associate with cholesterol-rich domains of the plasma membrane, called lipid rafts. Decreasing plasma membrane cholesterol levels significantly reduces CNGA2 channel function. A closely related CNG channel subunit, CNGA3, does not associate with lipid rafts. Biochemical analysis of chimeric subunits, made by swapping regions of CNGA2 with corresponding regions from CNGA3, will help identify protein sequences responsible for lipid raft association. These results, and results from electrophysiological studies of the effects of cholesterol analogues on channel function, will help explain how cholesterol regulates CNG channel activity. Defining the molecular basis for lipid raft association and cholesterol sensitivity will have implications for other related and physiologically vital ion channels, and may provide insight into clinical aspects of cholesterol metabolism disorders and cholesterol-altering drugs.